Spin Master Corp T.TOY

Alternate Symbol(s): SNMSF

Consumer Cyclical Leisure

Spin Master Corp. is a Canada-based children’s entertainment company. The Company creates, designs, manufactures, licenses and markets a diversified portfolio of toys, games and products, creates and produces multiplatform content, stories and characters in both original shows along with short-form series and creates digital games and apps. It operates through three segments: Toys, Entertainment and Digital Games. The Toys segment engages in the creation, design, manufacturing, licensing, and marketing of toys, games and products around the world. The Entertainment segment engages in the creation and production of multi-platform content, stories and characters in both original shows, short-form series and films. The Digital Games segment engages in the creation of digital games and apps which include monthly subscription services. It offers digital games, such as Sago Mini, Toca Boca and Noid. It offers entertainment games, such as Abby Hatcher, Zo Zo Zombie, Mighty Express, and more.

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Spin Master Corp

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Post by retiredcfon Feb 10, 2022 7:38am

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Post# 34415587

TD Upgrade

Spin Master Corp.

(TOY-T) C$48.16

Updating Outlook for Strong Preliminary Results Last Week Event

We are updating our financial forecast/target price for Spin Master ("Spin") following the company's preliminary release of key financial metrics for Q4/21 and 2021.

Impact: SLIGHTLY POSITIVE

Q4/21 Updated Preview: We have updated our Q4/21 financial forecast to account for last week's disclosure of the company's preliminary 2021 outlook for its key metrics of gross product sales ("GPS"), revenue, and adjusted EBITDA margin. As stated at the time, the results were well ahead of our forecast/consensus from a top-line perspective. While we had envisioned strong contributions from its Paw Patrol franchise and digital vertical, we were most impressed by the breadth of the 2021 GPS growth. We highlight that each segment achieved double digit growth on an annual basis, that in aggregate totaled ~21% on a consolidated basis. Overall, the preliminary figures illustrate Q4/21 results ahead of consensus contributing to a strong annual performance.

Outlook: We have also updated our financial forecast for 2022/2023. We continue to take a cautious approach to our 2022 forecast as the company laps the strong performance in 2021. We will look for management to provide initial 2022 guidance upon its Q4/21 release that should provide additional colour to revisit our growth assumptions. We do, however, forecast growth to reaccelerate in 2023, with potential key drivers being a Paw Patrol sequel movie, a Paw Patrol spin-off television series, and the ramp of Spin's digital initiatives including NOID.
Upside Potential: We estimate Spin has net cash of >$400mm (pre-IFRS 16) as at the end of 2021. We forecast this to grow to >$800mm by the end of 2023 in the absence of acquisitions. At this time, we have not built any potential upside into our financial forecast from acquisitions.

TD Investment Conclusion

We anticipate the valuation gap relative to its peers to narrow as its digital/ entertainment presence grows, and should Spin capitalize upon potentially accretive acquisition opportunities. We acknowledge a lack of near-term catalysts in the absence of acquisitions, that could limit near-term share price appreciation. On a mid-term basis, we anticipate a resumption of above average industry growth to drive Spin shares toward our revised $58.00 target. We maintain our BUY recommendation.